Commercial Property Lease - Bona Vacantia

[JeffreyD]

Evening all

My pension fund own a property that is leased to a firm that I used to own but has subsequently gone through a couple of acquisitions and has now been subsumed by a multi national.

The company that holds the lease was liquidated several years ago and the new hold co was given the same name. Rent has continue to be paid for several years subsequent.

The latest acquisition discovered that the original lease is with a defunct company and as that company has been put in voluntary liquidation the lease is "Bona Vacantia"

The company would like to mirror the lease to and continue occupying on the same terms.

I know I'm going to have to get a commercial property lawyer as the one I have used in the past is retired - however does anyone know if I have the right to refuse and just kick them out unceremoniously?

Thanks in advance

[Muncher]

I’m a commercial property lawyer. It sounds like the present tenant has no documented tenancy but has paid the rent that would have been due under a lease to another company entirely, that lease having come to an end.

The current tenant will almost certainly have acquired security of tenure under the landlord and tenant act 1954 meaning there are limited grounds under which you can bring that occupation to an end. I am happy to look at it in more detail if you would like.

[JeffreyD]

Muncher said:

I’m a commercial property lawyer. It sounds like the present tenant has no documented tenancy but has paid the rent that would have been due under a lease to another company entirely, that lease having come to an end.

The current tenant will almost certainly have acquired security of tenure under the landlord and tenant act 1954 meaning there are limited grounds under which you can bring that occupation to an end. I am happy to look at it in more detail if you would like.

Thanks.

I'll see if their heads of terms match our conversation and drop you a PM when I hear. Presume you are in the uk?

Would their tenure be linked to the original lease or would it be seen as a new one on some form of standard terms?

[Muncher]

Yes, based in England. By all means drop me a PM.

The security of tenure likely derived from the new tenancy rather than the old. The most likely course way forward is to agree a new documented tenancy with the current tenant to make matters clear for both parties.

[JeffreyD]

Thanks and will do

[surveyor]

JeffreyD said:

Muncher said:

I’m a commercial property lawyer. It sounds like the present tenant has no documented tenancy but has paid the rent that would have been due under a lease to another company entirely, that lease having come to an end.

The current tenant will almost certainly have acquired security of tenure under the landlord and tenant act 1954 meaning there are limited grounds under which you can bring that occupation to an end. I am happy to look at it in more detail if you would like.

Thanks.

I'll see if their heads of terms match our conversation and drop you a PM when I hear. Presume you are in the uk?

Would their tenure be linked to the original lease or would it be seen as a new one on some form of standard terms?

Just to check Jeffrey, what country is the property in?

[JeffreyD]

surveyor said:

Just to check Jeffrey, what country is the property in?

England.

When I get the outline agreement I'll make contact with Muncher.

[JQ]

If it's a substantial property, I'd also be getting advice from a Chartered Surveyor - the terms that you agree to can have a substantial impact on the value of the property.

[JeffreyD]

JQ said:

If it's a substantial property, I'd also be getting advice from a Chartered Surveyor - the terms that you agree to can have a substantial impact on the value of the property.

The old lease in theory had just over two years to run.
I won't be extending the lease as I would like to develop the property. Or more accurately sell the property with planning.

Given the nature of the tenant now I'd have thought they are going to strangle us with corporate lawyers and keep kicking the can down the road but we'll see what happens over the next couple of weeks.

Will update the thread if anything interesting happens.

[JQ]

JeffreyD said:

JQ said:

If it's a substantial property, I'd also be getting advice from a Chartered Surveyor - the terms that you agree to can have a substantial impact on the value of the property.

The old lease in theory had just over two years to run.
I won't be extending the lease as I would like to develop the property. Or more accurately sell the property with planning.

Given the nature of the tenant now I'd have thought they are going to strangle us with corporate lawyers and keep kicking the can down the road but we'll see what happens over the next couple of weeks.

Will update the thread if anything interesting happens.

Again just make sure you are properly advised - industrial land values now exceed residential land values in many locations. And with industrial yields at record levels, securing a 10 year lease to a strong covenant may well produce a higher value than a change of use. I have a number of clients with consented residential schemes who have secured changes of use to offices to maximise value.

Good news being that re-development is a ground for opposition of the lease renewal even with security of tenure.

[JeffreyD]

JQ said:

Again just make sure you are properly advised - industrial land values now exceed residential land values in many locations. And with industrial yields at record levels, securing a 10 year lease to a strong covenant may well produce a higher value than a change of use. I have a number of clients with consented residential schemes who have secured changes of use to offices to maximise value.

Good news being that re-development is a ground for opposition of the lease renewal even with security of tenure.

It's a lovely stone building in a residential area with high residential demand.

I owned the company that originally took out the 25 year full repairing upwards only rent review lease. Any company matching those terms would have to be owned by a madman. If the new multinational tenant agrees to anything similar then, yes I agree that selling with a tenant in situ would generate a strong return. I have a sneaking suspicion that what they will do is either
a) string us along whilst moving the current staff to one of their other offices in the region
b) try and strangle us into agreeing a short term lease on their terms.

I'd love to be proved wrong and when they actually confirm their position in writing I'll update the thread. Maybe even with photos of me parking my tanks on their lawn.

[Chrisgr31]

JQ said:

Good news being that re-development is a ground for opposition of the lease renewal even with security of tenure.

Even if you are going to sell it with planning consent?

[JQ]

Chrisgr31 said:

JQ said:

Good news being that re-development is a ground for opposition of the lease renewal even with security of tenure.

Even if you are going to sell it with planning consent?

I doubt a commercially astute developer would make such a decision until after they had got the tenant out.

I must admit lease renewals are not my area of expertise. What would be the consequence of changing your plans from development to sale of site with change of use?

[JeffreyD]

JQ said:

I doubt a commercially astute developer would make such a decision until after they had got the tenant out.

I must admit lease renewals are not my area of expertise. What would be the consequence of changing your plans from development to sale of site with change of use?

I very much doubt that the new company want to stay for any length of time - this has only come up due to some internal reorganisation and a sharp eyed lawyer has picked it up.
The lease has been through 3 M&As since the liquidation of the original leaseholder.

They are trying to pay the rent still but because the money is coming from a bank account with a different name than the lease my pension administrator is rejecting it.

[Chrisgr31]

JQ said:

I must admit lease renewals are not my area of expertise. What would be the consequence of changing your plans from development to sale of site with change of use?

I am not sure as its not my area of expertise either hence asking the question. I wasnt sure whether the freeholder had to plan to do the redevelopment themselves.

If the tenant is a national company I would assume they are properly advised and if they think the OP is going to redevelop or similar they will be wanting their compensation!

[JeffreyD]

Chrisgr31 said:

I am not sure as its not my area of expertise either hence asking the question. I wasn't sure whether the freeholder had to plan to do the redevelopment themselves.

If the tenant is a national company I would assume they are properly advised and if they think the OP is going to redevelop or similar they will be wanting their compensation!

Would be interested to know why you think they'd be entilted to compensation - is that part of the landlord and tenant act?
And they are definitely properly advised - they've got about three city firms on the email chain.

[surveyor]

For most redevelopment schemes, the compensation element tends to be small beer. Wonder if the Tenant will try and get the rating assessment increased?!

I think there are too many variables to advise whether it is possible to sell right now. In general, though, the uncertain nature of the tenancy will not help. If the Tenant wants a regrant on similar terms to the existing one, it may be worth agreeing, subject to inserting a Landlord redevelopment break.

I also note that it is held in the OP's pension. My experience of pension administrators is that they are incredibly risk-averse and take their duty to get the best value very seriously. They can in situations where the pension owner wants to take risk, be a bit of a pest.

[JeffreyD]

surveyor said:

For most redevelopment schemes, the compensation element tends to be small beer. Wonder if the Tenant will try and get the rating assessment increased?!

I think there are too many variables to advise whether it is possible to sell right now. In general, though, the uncertain nature of the tenancy will not help. If the Tenant wants a regrant on similar terms to the existing one, it may be worth agreeing, subject to inserting a Landlord redevelopment break.

I also note that it is held in the OP's pension. My experience of pension administrators is that they are incredibly risk-averse and take their duty to get the best value very seriously. They can in situations where the pension owner wants to take risk, be a bit of a pest.

I really can't see why they would want to keep this premises - it's the old head office of a firm they bought a couple of years ago and they have a couple of much larger premises within 15 miles. It's also really expensive. If they want to continue paying the rent it wouldn't be the end of the world and they are now a multi billion company operating in a regulated environment so their covenant is about as strong as it gets.

As I've said my main concern is that they try to blind us with paperwork and fk about for 6 months not paying the rent whilst moving the staff out and then handing back the keys. Having said that they are actually trying to pay the rent - my pensions administrator just keeps sending it back!

[CanAm]

"Bona Vacantia"? It’s not run by Jules and Sandy is it?

[Chrisgr31]

surveyor said:

Wonder if the Tenant will try and get the rating assessment increased?!

There arent many that try that trick these days , as the rate in the pound is so high it offsets any increase in compensation. However it is something that is considered when submitting an appeal for a reduction. Serve the reduction appeal after the hostile S26 notice has been served as the service fixes the RV for compensation.

Oh and for the OP yes if you do not want to grant a lease renewal for a protected tenancy then you will need to pay compensation in most cases. Compensation is based on the RV, either 1 or 2 times I think.